Enforcing the Competition Law in Namibia A Toolkit - cuts ccier

MERGERS & ACQUISITIONSBox 28: The Rothmans of Pall Mall/ British American TobaccoMerger in ZimbabweIn January 1999, British American Tobacco Plc of the United Kingdomannounced that it had reached an agreement with the shareholders of RothmansInternational, Compagnie Financiere Richemont AG of Switzerland andRembrandt Group Limited of South Africa to merge their international tobaccobusinesses. Subsequent to the completion of the international merger betweenBritish American Tobacco Plc and Rothmans International, Rothmans of PallMall (Zimbabwe) Limited in September 1999 applied to the CompetitionCommission of Zimbabwe for authorisation to acquire the entire issued sharecapital of British American Tobacco Zimbabwe Limited.The merging parties gave as one of the reasons to merge the declining marketfor cigarettes in Zimbabwe. It was presented that the Zimbabweanmanufactured cigarette market had declined to such an extent that it was nolonger big enough for the continued viability of two manufacturers asevidenced by the poor performance of British American Tobacco ZimbabweLimited in its financial year ended December 31, 1998.The case was evaluated as a horizontal merger as defined in section 2 of theCompetition Act.The Commission noted that although the merger would result in a creationof a monopoly situation in the relevant market (i.e. the manufactured cigarettemarket), it had other public interest benefits provided for in the CompetitionAct. The failing firm defence put forward by the merging parties was alsoconsidered a strong point in support of the merger.The Commission therefore authorised the merger with certain conditionsaimed at alleviating the adverse effects of the monopoly situation created.The conditions related to the disposal of surplus cigarette making equipmentto third parties interested in entering the Zimbabwean cigarette makingindustry, and surveillance by the Competition Commission of future cigaretteprice increases while the monopoly situation created remains in existence,with any price rises being justified to the Commission before being effected.Source: Alexander J Kububa, Issues In Market Dominance: Merger Control In Zimbabwe,paper presented at the World Bank’s Regional Conference on Competition Policy,Competitiveness, and Investment in A Global Economy, Dar-es-Salaam, Tanzania: 10–12May 20046.9 Joint VenturesIn some cases, existing competitors in a market may decide to enter into ajoint venture. The competition analysis of joint ventures generally raisessimilar issues to those discussed under the section of restrictive agreements,and therefore would normally violate per se competition rules. The processand information requirements for review of a joint venture, however, shouldresemble those discussed earlier in this section on M&As.74 Enforcing the Competition Law in Namibia: A Toolkit